Outsourcing? Don’t trip up on customer experience…

We’re starting to see some real changes in the Shared Services industry. Whilst the earlier focus on delivery cost remains important, the all-in cost to the enterprise is more in focus.  SLAs are becoming less important as users are realising that green SLAs don’t feel green, cheap does feel cheap, and the lack of the ‘right’ service is spawning an increase of shadow services across the enterprise eating into the initial estimated business case benefits.

The earlier solution to cost pressures through increased scale is facing into the reality that there are two curves at work – benefits of scale versus cost of complexity, and as you scale out across processes the added complexity can cause your benefit case to turn negative.

There is a need to look at this again, and this time from a different direction; the customer perspective, rather than purely from a cost and efficiency perspective.    For the cost element, Shared Services need to be looking to manufacturing to learn new tricks.  Whilst lean has been a buzzword for years, the new focus on lean in the context of a component based service delivery model is gaining ground.

“View every process as if you’re a customer, and then apply learning from the manufacturing industries – when you start doing this you start moving your services away from products and to a customer centric process.” Explained Simen Munter, Group General Manager of Global Shared Services at ANZ when I recently caught up with him to discuss the changing nature of ANZ’s business.

Five years ago, ANZ embarked on a strategic transformation which recognised there was a unique opportunity to create value for shareholders by broadening its presence in Asia, whilst leveraging its strong foundation in Australia and New Zealand, to become a super regional bank.   The move recognised that a once-in-a-century shift was underway in the global economy as growth opportunities moved from the developed economies of the West to the Asia Pacific region.

“Instead of running 33 different banks, we want to be able to gain scale benefits and run as one bank across the 33 markets in which we operate. To do this we have significantly invested in our operations network across the region.

Our hubs network is expanding ANZ’s operations capability to support business growth in a way that is sustainable and cost effective. As a part of our super regional growth strategy we have operations in Australia, New Zealand, Manila (the Philippines), Chengdu (China), Bangalore (India) and Suva (Fiji).”

ANZ Operations

In Shared Services we aspire to operate  through a set of processes which are globally consistent, but able to handle local variations. We work to have the right people in the right locations to offer the best service to our customers.

Simen explained: “Specialist hubs help us build a super regional workforce, giving us access to capabilities that may be limited in our domestic markets. The Manila hub, for example, is a centre of excellence in voice based work. Our hubs are built around local talent pools and expertise.”

“Capability and capacity are the main drivers of a customer centric operating model. Staff in operating hubs provide additional capability to deal with increased volumes and allow in-country teams to focus on other activities that support business and customer outcomes. We work towards sharing products, platforms and processes across our geographies to give us the ability to build a ‘single production line’ and maximise re-use wherever possible.

“A key benefit of our approach is the ability to access ‘been there and done that’ talent, enabling us to leverage experience gained elsewhere. Take things like payroll and accounts payable, we have 33 markets to run this for. To find people who are experienced at running that kind of complexity is very difficult in Australia, whereas some global companies have done this for years. By being able to tap into a wider pool of skillsets across multiple locations we can leverage these learnings and operate more efficiently.“

“There is a real opportunity through blending highly skilled employees with low cost delivery so that we can be both locally competitive and cost effective. Nowhere is this as important as when you are competing in low cost locations.”

Looking for the extra edge

Looking at what you do from a customer perspective is challenging, as current best practice has been focused on SLAs and not based around the moving target of providing excellent customer service.   SLAs are typically set at the worst outcome your customer is willing to accept – meeting that consistently is hardly a good measure of success.

Simen explains: “The focus cannot be on these types of measures, the focus must be on solving the issue for your customer. My approach to shared services leverages skill and expertise across our regions to design, build and deliver services with the customer in mind.

“You’ve really got to focus on quality, as bad quality is a driver of resource requirements. The other focus is to ensure that the work being done is worth doing or is it work which exists as a result of failure in other processes.  We are seeing substantial opportunities in ‘turning off’ volumes by fixing things at source by looking beyond the current process and into what would have been ‘perfect’.

“We have seen a significant uptake in both external customer satisfaction and  internal customer satisfaction over recent  years.  It’s something we’re spending a lot of resources on as we see that as critical for our long term success.

“We focus on getting the customer service right and embed this  in our processes.

Also, when you have satisfied customers it gives you the room you need to further innovate and improve. If you are on the backfoot with quality you are spending all your time firefighting.  I don’t want great firefighters, I want superb ‘fire prevention officers’ – the people whom are able to look at things which are ‘not perfect’ and change them prior to issues becoming real service issues.”

Increased expectations

For outsourcers, these changes in approach can be quite complicated. Previously a product or transaction based approach was the norm, and you could meaningfully quote for particular parts of a business.  In a component based enterprise, the ‘end to end’ products disappear as many processes are identical across products and there is a new need to offer value beyond undertaking a particular type of ‘set in concrete’ work.

“This is similar to what happened in manufacturing decades ago, you can’t just aim to deliver to outdated SLAs, you have to own the outcomes in a very different way, as your element is integrated into the overall service delivery in a much more holistic manner.  The outsourcer needs to make sure they drive the innovation within their area, it isn’t only about the ‘run’ and meeting SLAs anymore.

“You need a competitive advantage beyond offshoring.  Outsourcers really need to bring something which adds value beyond the  added complexity of engaging with them, demonstrating they know what a business wants, they know what good output looks like and they know how to do it effectively.

“Overall, we’re seeing a strong growth in the industry towards work going to captives as they have proven to be more effective in driving adaptive change – it is difficult to outsource change. However, as organisations are increasingly process oriented, there’s a huge opportunity for outsourcers to provide large scale processes offering standardization while leveraging capabilities across multiple customers.” said Simen.

“I continue to see Global Shared Servicesas a key growth area in the corporate world, and an exciting area of opportunity for talent.  The specialist skill-sets required to effectively use a global delivery model, optimise skill-sets across talent pools and locations,  automation, organisation, production management is valued and there is a level of excitement about how the world of service delivery is changing.

“We are also seeing real opportunities in other areas, for instance, reporting and analytics is an important area for us.  We see that as a huge growth area, both in terms of offering the service to others across ANZ, but also in terms of using those insights into operating more effectively ourselves.

“There are two golden rules: quality cannot go down and price cannot go up. We don’t believe we need to compromise on quality to get the cost benefit when we do this right.

“Our customers need consistency, effectiveness and efficiency and that is what we aim to deliver,”said Simen.

“If you look at what’s successful from our perspective there’s only two metrics which really matter: customer satisfaction and cost.”

Join Simen during Shared Services & Outsourcing Week 2014 where he’ll be delivering the presentation Driving out Costs while Improving Internal Customer Service Delivery.

Getting true value from outsourcing: the recipe for success

I first bumped into Jane Stafford, Executive Manager for Banking Process & Optimisation at Suncorp Banking during our Process Excellence event last year,  then again during Shared Services and Outsourcing Week. Jane certainly knows a thing or two about outsourcing – she’s been in the banking and finance industry for more than 20 years, spending years managing the optimal blend of insourcing and outsourcing strategies and implementation for business processes.

Jane’s current role is to manage Process Ownership for Suncorp Bank, monitoring, measuring and delivering business improvement strategies with a focus on process simplification, cost reduction and improved customer experience.  I recently caught up with Jane ahead of here workshop at SSOW 2014 to delve into the key ingredients for achieving an optimal blend – helping other organisations to maximise the true value of outsourcing.  Jane shared her insights on how the landscape has shifted, paving a new way for vendor relationships. Take a read below:

I’m absolutely seeing a need for outsourced providers to continue to be relevant by looking at providing services that sit outside of data entry. Automation is really kicking off in in our industry. We’re seeing far more centralisation of corporate functions (generally the higher value activities like analytics). That’s going have a flow-on effect into knowledge process outsourcing.

We’re seeing the impact of increased regulation occurring. That puts a squeeze on our margins and puts the spotlight on process innovation. The knock on effect to providers is they need to be able to innovate with end to end outsourcing and continue to drive down the cost that sits within that process through lean methodology or something similar.

A few years ago there was a lot of low hanging fruit for outsource providers, if they could do the data entry, they had business. However, client needs are changing as a consequence of a number of different factors that puts pressure on them to go up the value curve in terms of what they can offer from the service point of view.

There are a few fundamentals when looking to cement outsourcing and drive relationships that open up new levels of value:

Keep the ingredients fresh

The secret is building capability in-house to manage optimal blends. Optimal blends means that you are constantly looking at your landscape, making decisions around what is appropriate to outsource, automate and keep in-house.

It’s not as simple as locking in on those three things; it’s constantly evolving depending on what’s happening within your business, what’s happening within the environment and what’s happening in your innovation stakes. We have found most success in just having that management capability pool.

We’ve set up that infrastructure to manage an optimal blend for both onshore and offshore. My team are constantly monitoring dashboards to work out what’s on the horizon in terms of automation onshore or offshore. That involves rolling things back from time to time, and having a framework based on strategy rather than just reacting to what we had done previously.

Set the right temperature

Look at all the decisions that will need to happen to support the way you’ve decided to go. It starts by establishing your core competencies – all the decisions are based around that and people will be challenged if there’s no understanding of what they are.

Executive sponsorship is crucial. There needs to be an appetite to manage the people and cultural components, because every decision you make around in-house, automation or outsourcing has knock on effects that need to be managed throughout that change period. You won’t get your benefit if that isn’t addressed very early on.

One of the key things we learnt five or six years ago is that it’s okay to have a strategy that’s learnt during outsourcing, but if the business is not ready in its own maturity and its own journey, where you haven’t intervened enough to support a new culture, that culture will eat your strategy anyway.

Clean up as you go

Be clear on what your drivers are if you’re choosing to outsource. For us, it was about cost efficiency, labour arbitrage and accessing scale from the outset. But the more and more I get into it, the less important those factors are to me personally, the more I’m actually looking to have providers perform innovation, lean  and refine our processes to remove waste from them. If you don’t have that, your processes end up being old and full of waste.

There’s never a truer analogy of garbage in, garbage out, than when you’re doing an outsource transition…

Set the timer, watch it rise

There are some key areas where you can unlock huge value in the vendor–client relationship: 

  • Move away from master-servant relationships: We’ve tried to co-locate and second people from the outsourced organisation into our organisation, coming to an arrangement with our provider where we actually have contracted in someone from India to be in my team for 12 months. They are actively working in Australia, onshore, understanding the business end-to-end. It takes trust to open your books completely, but the sharing of information and depth of understanding about what we can achieve for our customers is far deeper.
  • At an operational level: Position your outsource provider as an extension of your current team, just sat in another location. Include them in your reward and recognition programme – our outsourcers tend to really enjoy that. It’s still a work in progress for us, but I think it’s the next big thing, to challenge both organisations to position themselves around the commercial structure. That’s where you’re really putting everything on the line.
  • Think beyond the service levels: Our commercials are still structured around SLAs, turnaround times and individual processes. That inhibits everybody from being free of worrying about whether or not a penalty is going to apply. The future is about contracting to end outcomes and saying, “You know what? We don’t care if it’s 24 hours or if it’s 48 hours, this is the outcome we are looking for”. The onus is on both sides, it takes trust and the other party to be willing to not take advantage of that trust too.

Contestability in Queensland: What it means for you.

I’ve been at a few events recently where people have mentioned that they’re intrigued to see what happens with the results of ‘Contestability in Queensland’.

It was during a recent conference where we were debating the future of outsourcing (or partnering) and how it’s being used across Australia where it came up again.

To be completely honest, I knew very little about the topic so you can imagine my delight when I found out we were covering the very subject at our upcoming  Public Sector Transformation conference.

It was time to do some research and speak to Mike Burnheim, Assistant Director-General, Shared Services Department of Science, Information Technology, Innovation & the Arts to find out exactly what’s going on…

Queensland is on the brink of what could potentially be a complete overhaul in service delivery within the public sector.

Recently Queensland Health revealed plans to open its full ICT service catalogue up to the market, starting with end-user services and telephony.

The contestability agenda within the Queensland government came from the Commission of Audit report that was made public in late April. There are 155 recommendations in the report, focussed on transforming government and its service delivery.

To gain an understanding of how the public sector is determining the effectiveness of its current processes of delivery to establish the best solutions, I spoke with Mike Burnheim.

He explained that of those 155, there are over 30 recommendations that have a contestability element, where government is seeking to move into a contestable agenda to test whether it needs to continue to be in that service delivery space or not.

“It’s a fairly broad agenda for government, and it applies to front-office, as well as back-office. They’re even looking at contestability in terms of prisons, public transport, and a whole range of other frontline service delivery areas, as well as back-office. It’s a fairly broad ranging challenge to rethink whether it needs to be in the space of delivering services at all, or moving back away from that and just enabling those services to be delivered.”

Mike’s focus is specifically on the shared services element, concentrating on back office services where he’s currently in the process of assessing the relative efficiency and  effectiveness of current delivery models:

“It’s not a foregone conclusion that back office services will be outsourced,  we now need to go through a process to determine how effectively and efficiently we’re delivering those services internally, alongside alternative delivery models, and make an objective assessment from there.”

What follows now is a process that identifies the different objectives for each service to establish where they will be best placed:

“Outsourcing may or may not be the logical solution. Some  services may remain in-house; there may well be a case for government to retain some of those for a variety of clear reasons – costs, risks, policy agendas, etc.”

” We’re also not in the position to quantify what potential savings may or may not be achieved until we move through this objective assessment process.”

“Where outsourcing is identified as the solution, the benefit is that it’s smaller government. The services are still delivered, we’re just enabling those services to be delivered and contract managing them, rather than the actual doing.  Additionally, when we don’t own the assets that deliver those services internally, we don’t have to make the capital investments that we’d need to build and keep those things up and running. It becomes a shift to operational expenditure, as and when we use those services. There are a whole range of potential benefits if we implement these processes properly.”

This transformation process doesn’t come without its risks; objective assessment of current delivery is a new space for much of the public sector. Mike explained:

“We want to be able to deliver a roadmap of the servicing and functions we think are potentially able to move, as well as the ones that we probably wouldn’t contemplate in first phase. Once we’ve got that endorsed, we’ll move through an implementation planning process.

“The real risk is the fact that government has been used to an internal delivery model  for decades. We haven’t been playing in a competitive market space yet. One of our risks is to be able to objectively assess the market maturity and the potential that the market brings to this space. We’re not skilled to do that, so one of the first things that we’ve done is gone out to the industry to engage an industry partner to assist us to do that. We’re getting claims from various industry suppliers as to  what they can do. We need to reality test these claims with a good industry partner, so that we can discount a range of options and come down with what the realistic options are for government, that we could then assess our internal services against. Our first priority is to get that robust industry partner to work with us on moving through this next process. We hope to have that in place in October.”

One of the other biggest challenges facing the public sector is the softer side of business transformation, one that will ultimately drive success; culture.

“The  Queensland Public Service Commission has said, if we’re going to build ourselves as a public sector for the 21st century, let’s start at reconceptualising what our role is.

“A new set of public sector values have just been released that are contemporary values that we will be moving the sector towards – customers first, ideas into action, unleash potential, be courageous, empower people.  For a transformation agenda, it’s starting at a fairly high level, in terms of how we redefine role, culture, values, look at service redefinition, and then the skillsets that we’ll need to follow through and deliver that new way of operating. They’re big challenges to change our thinking, which, in a real sense, has been traditional delivery thinking for decades.”

Hear more from Mike during Public Sector Transformation 2013 where he will be delivering the Keynote Presentation: Contestability in Queensland – Moving from a Provider to an Enabler.